Dombey v. Phoenix Newspapers, Inc.
| Decision Date | 15 January 1985 |
| Docket Number | CA-CIV |
| Citation | 147 Ariz. 61,708 P.2d 742 |
| Parties | , 12 Media L. Rep. 1201 Dale K. DOMBEY and Billie Jo Dombey, his wife; and Dombey, Inc., an Arizona corporation, Plaintiffs-Appellees, v. PHOENIX NEWSPAPERS, INC., an Arizona corporation; and Bill Ahrens, Defendants- Appellants. 16437. |
| Court | Arizona Court of Appeals |
Appellants bring this appeal from jury verdicts entered against them in favor of appellees Dale K. Dombey, Billie Jo Dombey, and Dombey, Inc. The jury returned a verdict in favor of Dale K. Dombey and Billie Jo Dombey and awarded them $100,000.00. The jury further awarded $500,000.00 to Dombey, Inc., an Arizona corporation. Both verdicts were against Phoenix Newspapers, Inc., an Arizona corporation, and Bill Ahrens, a reporter for Phoenix Newspapers, Inc. The verdicts are premised upon defamatory publications concerning Dale Dombey and Dombey, Inc. The issues raised by appellants are summarized as follows:
1. Were appellants entitled to a directed verdict against Dale Dombey because he was a public official?
2. Were appellants entitled to a directed verdict against Billie Jo Dombey because the articles were not of and concerning her?
3. Were appellants entitled to a directed verdict against Dombey, Inc. because the corporation was not libeled?
4. Was the jury verdict of $500,000.00 in favor of Dombey, Inc. based upon speculation, conjecture, passion or prejudice and not supported by the evidence?
We begin by reviewing the facts. Appellee Dale Dombey began his career as an insurance agent in 1963. In 1965 he implemented life and health insurance programs for Maricopa County employees. Dombey was subsequently appointed "agent of record" for health and life insurance for Maricopa County. Dombey was not a county employee; he was compensated in the form of commissions from whichever insurance carriers were chosen for the various programs implemented. Although the position of agent of record was an annual political appointment, Dombey had been appointed each and every year from 1969 through 1979. Dombey's responsibilities as agent of record included developing insurance programs and submitting them to the county Insurance Advisory Committee. Generally, he would present several alternative plans and advise the committee as to each. The committee would choose a particular plan and make its recommendation to the Board of Supervisors. The Board of Supervisors had ultimate control over which plans, if any, were to be implemented.
Dombey was not a member of the Insurance Advisory Committee, although he was responsible for advising the committee on all health and life insurance matters. Additionally, Dombey would explain the various proposals to the Board of Supervisors to aid them in reaching a decision. Dombey would receive commissions from whichever carriers the Board of Supervisors ultimately chose.
In addition to being agent of record for life and health insurance, Dombey was also appointed to the position of plan administrator for the county's deferred compensation plan in 1974. As plan administrator, Dombey was one of five members of the Deferred Compensation Committee. Dombey also set up various plan options for county employees who desired to participate in a deferred compensation plan. Once again, Dombey was not compensated by the County, but received commissions from whichever institutions county employees invested their funds with. Again, the Board of Supervisors ultimately decided which options would be made available to county employees participating in the deferred compensation program. However, the Board relied heavily on Dombey's expertise and recommendations.
As previously noted, Dale Dombey was listed as agent of record for life and health insurance, as well as plan administrator for the deferred compensation program. However, Dombey had incorporated in the early 1970s under the name R.W. Grange Limited. Thus, the corporation received all compensation and carried on the insurance business. Dale Dombey was, in effect, an employee of the corporation.
In addition to the county insurance business, Dale Dombey sold insurance to other governmental entities, as well as to the public in general. Thus, his position as agent of record for Maricopa County provided only a portion, albeit a significant portion, of his total income.
Approximately two or three years after incorporating, Dombey sold fifty percent of the corporation's stock to Wesley Arnold. In 1975, Arnold exercised an option to "buy-out" Dombey's remaining fifty percent share of the corporation's stock. Apparently Arnold's exercise of the buy-out option was triggered by a heart attack suffered by Dombey. The buy-out agreement provided that Arnold would purchase Dombey's stock gradually over a period of ten years, making quarterly payments totaling $258,000.00. Under the terms of the buy-out agreement, Dombey retained the Maricopa County insurance business, as well as that of several other governmental agencies. Approximately six to eight months after Arnold exercised the buy-out option, Dombey incorporated the remainder of his insurance business under the name Dombey, Inc.
In October of 1977, Dombey hired Donald Jones as a salesman, with the intent of training him and bringing him into the business as a partner. The following month, Dombey suffered another heart attack, after which he transferred all of the stock of Dombey, Inc. to Donald Jones through a buy-out agreement. The agreement provided that Dombey would receive diminishing percentages of the corporation's income over a ten-year period, beginning at 75 percent and ultimately reducing to 25 percent at the end of ten years. Dale Dombey no longer worked for Dombey, Inc. after Jones took over the business except for occasional consultations concerning management of Dombey, Inc. or advice on specific insurance problems. However, Dombey remained agent of record for Maricopa County life and health insurance and plan administrator for the deferred compensation program, although Jones acted as Dombey's representative in handling county insurance matters.
The eighteen articles upon which appellees brought suit were published in the Arizona Republic and Phoenix Gazette in March and April of 1979. Initially, the articles concerned conflict of interest allegations against then County Manager Charles Miller. Dombey was named as an investment partner and longtime friend of Miller's, as well as the man in "control" of Maricopa County's life and health insurance programs. Subsequent articles insinuated that Dombey had made excessive commissions from the life and health insurance programs and particularly from the deferred compensation program.
Appellants initially contend that Dale Dombey was a public official under New York Times Company v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), and its progeny. Accordingly, Dombey would be required to prove "actual malice" on the part of appellants as a prerequisite to recovering damages for libelous publications. See New York Times v. Sullivan, supra. The trial court ruled that Dale Dombey was not a public official.
Initially we must determine the appropriate standard of review applicable in reviewing the trial court's conclusion. The issue of whether Dale Dombey was a public official is one of federal constitutional fact. See Rosenbloom v. Metromedia, Inc., 403 U.S. 29, 91 S.Ct. 1811, 29 L.Ed.2d 296 (1971). Accordingly, as an appellate court we are authorized to conduct a de novo review of the record and make an independent determination as to whether Dale Dombey was a public official. See Bose Corporation v. Consumers Union of United States, Inc., 466 U.S. 485, 104 S.Ct. 1949, 80 L.Ed.2d 502 (1984); Rosenbloom v. Metromedia, supra.
The United States Supreme Court first set forth the standard to be applied in defamation actions brought by public officials in the case of New York Times Company v. Sullivan, supra, holding that:
The constitutional guarantees require, we think, a federal rule that prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless he proves that the statement was made with 'actual malice'--that is, with knowledge that it was false or with reckless disregard of whether it was false or not.
276 U.S. at 279, 84 S.Ct. at 726, 11 L.Ed.2d at 706. Subsequently, in the case of Rosenblatt v. Baer, 383 U.S. 75, 86 S.Ct. 669, 15 L.Ed.2d 597 (1966), the Supreme Court provided some general guidelines for deciding whether a particular individual constitutes a public official:
There is, first, a strong interest in debate on public issues, and, second, a strong interest in debate about those persons who are in a position significantly to influence the resolution of those issues.
Criticism of government is at the very center of the constitutionally protected area of free discussion. Criticism of those responsible for government operations must be free, lest criticism of government itself be penalized. It is clear, therefore, that the "public official" designation applies at the very least to those among the hierarchy of government employees who have, or appear to the public to have, substantial responsibility for or control over the conduct of governmental affairs. (emphasis added)
383 U.S. at 85, 86 S.Ct. at 675-76, 15 L.Ed.2d at 605.
Clearly Dale Dombey was not a government employee. However, appellants point out that case law subsequent to Rosenblatt has indicated that an individual may be considered a public...
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